Bert Caldwell: Home Depot’s fix-it man paid well for a job not done

Home Depot directors finally put the hammer to Bob Nardelli.

It was a Nerf hammer.

Nardelli, the chief executive officer, left with a severance package estimated at $210 million, but that was before the stock market reacted so enthusiastically to his ouster. The price of a Home Depot share rose 91 cents Wednesday, the day the company announced Nardelli’s departure. The man’s stock options will be worth more thanks to his own canning.

Lord knows he did not do anything for Home Depot stock during the five years he ran the company. Despite a steady increase in earnings, shares were worth 8 percent less when he left than they were when he took over. Shares of smaller rival Lowe’s more than doubled over the same period, yet its CEO earned one-quarter what Nardelli did for the 2005 fiscal year.

He reportedly could have saved his job by agreeing to some adjustments in his pay package, but refused to go as far as the board wanted because that would imply he had not earned his keep. Many shareholders had already reached that conclusion.

Faced with what was sure to be an ugly annual meeting last spring, Nardelli convinced board members they need not show up, an altogether amazing way to conduct business at the most important gathering of the year for a publicly owned company. In a performance that attracted widespread attention in the business press, Nardelli then proceeded to berate shareholders who dared question his management and compensation.

Not much of a way to build support among those who, after all, hired you. And based on a total of 2 billion shares outstanding, Nardelli’s severance amounts to about 10 cents per share out of stockholder pockets. Maybe the board members should stay home again this year.

That meeting was the beginning of Nardelli’s end, although the seeds of his undoing could as well be traced back to the circumstances of his hiring, and the individual largely responsible — Kenneth Langone.

Connoisseurs of golden parachute-packing will recognize Langone as the New York Stock Exchange board member most responsible for treating CEO Richard Grasso to a $188 million pay package. Both were sued by then New York Attorney General and now Gov. Eliot Spitzer, who sought the return of $100 million.

Not only did Langone negotiate Nardelli’s compensation, he talked incumbent Home Depot CEO Arthur Blank into stepping aside. Nardelli was not willing to leave his post at General Electric unless he got the top executive spot. Blank had to go.

He did, which was kind of cold, considering Blank and Langone were among the co-founders of Home Depot.

Blank subsequently bought the Atlanta Falcons football team. Neither Blank nor Nardelli had much of a 2006.

Nardelli’s ouster will refocus attention on executive pay just as the U.S. Securities and Exchange Commission has taken some of the bite out of new rules regarding disclosure. Although the major change makes sense – options will not be counted as compensation only when they vest – its implementation without any opportunity for public comment irritated many who hoped better disclosure would shame more corporations into limiting executive pay.

One of those many was Rep. Barney Frank, D-Mass., the new chairman of the House Financial Services Committee. Frank has long had a problem with big salaries for those in corner offices, and now he is in a position to do something about it.

Frank, speaking last week to the National Press Club, said he wants to give shareholders the power to vote on executive pay instead of letting directors — often selected by the CEO — hand out the checks. He noted a study that found the three top officials at the 1,500 largest corporations pocket almost 10 percent of the profits.

Meanwhile, many pension programs are under-funded.

“We’re going to be taking a look at this,” Frank said.

He should call Nardelli and Langone when his committee holds hearings, and nail them.